What type of protection does term insurance provide?

Term insurance provides temporary protection for a specific period. This type of life insurance is designed to cover the policyholder for a predetermined term, usually ranging from one to thirty years. If the insured person passes away during this term, the beneficiaries receive a death benefit. However, if the term expires and the insured is still alive, the coverage ends without any payout, unless the policy is renewed or converted to a permanent policy.

This characteristic distinguishes term insurance from other types of life insurance. Permanent coverage for life, as suggested in the first option, is associated with whole life or universal life policies, which offer coverage for the lifetime of the insured as long as premiums are paid. Options that link coverage to investment performance is characteristic of policies like variable life insurance, where the cash value can vary based on investment choices made by the policyholder. The fourth option regarding coverage that changes monthly is not a standard feature of term insurance, which typically has fixed premiums for the duration of the policy term.

Therefore, the nature of term insurance as offering temporary protection for a specific duration aligns perfectly with its fundamental design and function.